Russia GDP Q1 2021

Russia: GDP contracts less than initially estimated in Q1

The economy contracted 0.7% year-on-year in the first quarter of 2021, according to a second estimate released by Rosstat on 15 June. The result marked an improvement from the previous quarter’s 1.8% drop and came in above the first estimate, which had shown a 1.0% decline in activity at the outset of the year. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, GDP remained flat in Q1, after shrinking 0.2% in Q4 2020.

Although a breakdown by expenditure components is not yet available, looking at the production side, Q1’s overall improvement was largely led by a recovery in the manufacturing, and retail and wholesale sectors as the easing of lockdown restrictions began to gradually release pent-up consumer demand. Similarly, services activity grew stronger, as it slowly shrugged off the constraining effects of the pandemic. That said, the mining sector posted another large contraction in output, weighing on the overall GDP performance.

Looking ahead, GDP is expected to rebound this year, as the lifting of restrictions at home thanks to the vaccine rollout revives domestic demand. Similarly, global vaccination campaigns should rekindle foreign demand, which, coupled with a healthier global oil market overall, bodes well for the external sector.

Commenting on the outlook, Artem Zaigrin, chief economist at SOVA Capital, struck a rather optimistic tone:

“Russia’s 4M21 performance has led us to upgrade our Q2 2021 and 2021 forecasts in May to respective growths of 8.5% yoy and 3.4% yoy. We expect the recovery momentum to moderate as the economy reaches its potential

(both in the energy and non-energy sectors) closer to year-end 2021, and we forecast GDP growth of 2.0% yoy in 2022.”

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